A team move typically refers to a group of employees, usually led by a senior employee or partner, leaving to join another firm – the effects of such moves can be particularly damaging to firms. In this article, we advise on the steps to minimise the risk of such events or the impacts caused by them.
Carefully drafted Partnership/LLP agreements and employment contracts go a long way in protecting the firm. Employment contracts should be tailored to individuals having regard to their seniority and specific roles, and then reviewed regularly as those roles develop. What might have been an unacceptable restriction for a junior employee, and therefore unenforceable, might be acceptable for a more experienced team member with greater exposure to client relationships and know-how. Post-termination restrictions can be notoriously difficult to introduce after employment has started, so take advantage of promotions and pay reviews as the time to increase protection in line with increased rewards and seniority.
Including post-termination restrictions and, garden leave provisions should be a starting point but contracts should also address obligations of:
In the same way that firms will have in place disaster recovery plans, IT failure arrangements, data breach plans and other ‘critical event’ arrangements, they should have in place an ‘action plan’ to deal with partner, senior employee and team moves.
Those plans are a sensible part of a risk management strategy and should address a wide range of issues including data security, client reassurance, market announcements, enforcement of restrictions and confidentiality, and the notification to new employers of the existence of contractual restrictions.
The plan is often prepared in conjunction with legal advisors and ensures firms have a strategy to deal with both the legal and practical issues arising – many firms will put in place a policy of insurance to cover the legal and practical costs of such action.
Where appropriate protections are in place, the affected firm might be able to take steps to restrict a team’s activities, by way of injunction proceedings. Courts do not grant injunctions, particularly those restricting the actions of individuals, lightly, so strong evidence will be required if this route is to be pursued and it’s important to gather that evidence as quickly as possible.
Ensure that contracts and policies expressly give the right to monitor online activity, emails and phone records, as often a review of IT systems will enable a firm to determine how the team move has been organised and establish any evidence of breaches of confidentiality or other duties.
A review of email accounts and download activity of employees may well reveal a conspiracy. Similarly, requesting the return of work mobile phones, without deletion of material, so they can be examined, is a sensible step.
Liaising with the firm’s own IT team, as part of the action plan exercise, is sensible to establish the capability of the team in interrogating devices and securing information, which will help determine whether external support is likely to be required if a move does take place.
When a move has occurred, consideration will need to be given as to whether any data breaches have also occurred and where they have, necessary reporting steps be taken.
Experience of past cases suggests that areas for close scrutiny include:
Partners and senior employees tend to be more sophisticated, but will often ‘let down their guard’ when dealing with social media and social messaging platforms – often far more is discovered from a WhatsApp account on a mobile phone, than from a review of a work email account.
Above all, action must be taken quickly - if a restraining injunction is to be sought then the court will expect an enforcing party to have acted with all haste – any delay can be fatal.
Exit interviews can be a useful tool in the information gathering process. Firms should look to conduct them with employees who have resigned to take competing employment – and ideally after reviewing the email and phone accounts. This will enable specific questions about any possible matters of wrongdoing, or collusion to be raised and affords an opportunity to remind the exiting employee of post-termination restrictions and ongoing duties of confidentiality. It might also serve, in an appropriate case, to ascertain any underlying grievance, or to provide an opportunity to seek to persuade the partner or employee to stay.
Use correspondence setting out offboarding arrangements such as final pay details and return of property logistics, remind the exiting employee in writing of their ongoing contractual obligations – consider enclosing a copy to ensure they are familiar with them.
Requiring departing partners or employees to take garden leave, rather than paying them in lieu of notice or requiring them to work their notice, has several advantages – it affords the firm the ability to cement relationships with key clients who were serviced by the departing individual or team, it breaks their connection with the market and also gives the firm further time to uncover evidence of wrongdoing. The partnership/LLP agreement or employment contract should include a contractual garden leave clause, requiring the individual(s) to stay away from the office and to not communicate with colleagues or clients during that period.
Firms should seek to promptly engage with key clients serviced by the departing individual(s), to reassure them of continuity and to cement relationships with new client partners/team members.
Firms should also communicate with other team members of the departing individual(s), to reassure them and to seek to identify other individuals who may be wavering or who are shaken by the departures. Often a team move presents promotion opportunities for remaining team members.
It might also be possible, where a move or team’s move was improper, to pursue a claim for damages in lieu (or in addition) to seeking to enforce the restrictions. In appropriate circumstances, for example a partner who has led a team move might be compelled to compensate the firm for losses caused by them, or a competitor which knowingly took the team in breach of restrictions, might be compelled to compensate or account for profits wrongfully generated.
The firms who best deal with team moves are those who have planned ahead – thus the key ‘takeaway’ is that firms should give consideration to the possibility of a team move and have in place a clear plan to deal with it.
Andrew Perkins is the head of Ashfords’ commercial litigation team with significant experience of bringing and defending actions for breaches of restrictive covenants, fiduciary duties, confidentiality and other contractual restrictions. He regularly advises on business protection arrangements. Our employment team works with our clients at all levels – providing day-to-day HR advice, employee relations support through to advising on strategic boardroom matters.
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